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Does Fiscal Decentralization Promote Fiscal Discipline?
2015
Emerging markets finance & trade
We investigate the efficiency and equity implications of a redistributive rule that takes into account both local tax collection efforts and deviation of local incomes from respective targets under alternative fiscal mechanisms. We show that, if the general budget constraint is binding, the proposed transfer rule leads to higher fiscal discipline under fiscal decentralization (FD) than under centralized redistribution. Although the centralized decision yields better income distribution than FD,
doi:10.1080/1540496x.2015.1012920
fatcat:73b6jtpczbdxxncyifwwvarv4e